One million people take out Payday Loans to pay mortgage

Almost one million Britons have taken out an emergency ‘payday’ loan to help pay their rent or mortgage in the last year, according to Shelter, the housing charity.

The high degree of borrowing highlights the “spiral of debt” that people are falling into to keep a roof over their head, Shelter said.

The charity also found that seven million Britons are relying on some form of credit to help pay their housing costs.

Campbell Robb, Shelter’s chief executive, said: “These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home.”

He said that short-term payday loans, which charge interest rates of up to 4,000 per cent, are a “totally unsustainable” way of borrowing. The loans can “quickly lead to debts snowballing out of control”, said Mr Robb.

Payday loans can be taken out on the high street or online and require minimal credit checks. However high rates of interest mean that people can end up paying back far more than they borrowed if they fail to repay the debts quickly.

Martin Lewis, an executive at MoneySavingExpert.com, said: “It is incredibly worrying that there is now evidence that people are using payday loans to meet housing costs. While it is an obvious temptation to grasp these loans as a lifeline, in the long run it may hurt more than help.”

Household bills are set to rise further this year, which could push people further into debt.

The rising cost of energy means that householders on standard gas and electricity tariffs could receive a quarterly gas and electricity bill of £514 next month, according to MoneySupermarket.com, the price comparison website.

“The start of a new year is an expensive time as consumers deal with a festive financial hangover. A huge energy bill will come as an additional nasty shock,” said Scott Byrom of MoneySupermarket.com.

Shelter’s findings were based on a YouGov survey of over 4,000 people.